Hammond denies freelancers of recognition

Not
a single positive mention of self-employment in Philip Hammond’s House of
Commons speech yesterday reflects a generally lacklustre Autumn Statement 2016
for freelancers.

Chris
Bryce of freelance body IPSE seemed to sum it up best when he said that the
chancellor gave “no recognition for the immense contribution the self-employed
make to the economy.”

Mr Bryce added: “Having trumpeted the lowest
unemployment rate for 11 years, ironically [Mr Hammond] launched an attack on
the group largely responsible for this record.”

The attack that the former freelance veteran was
referring to will see freelancers in the public sector who supply their
services through a limited company lose their responsibility for IR35.

It will be up to the ‘paying agent’-- the end-user
or recruitment agency, whichever party pays the freelancer’s limited company,
to decide if IR35 applies and, if so, apply tax automatically.

This tax seachange from April wont’ affect
unincorporated businesses (sole traders), although Mr Hammond was not
measurably more supportive, or less persecutory, of them.

In fact, half way through his speech when covering
fiscal forecasts, he blamed “rapidly rising” self-employment (and incorporation)
for having a corrosive effect on tax revenues.

The chancellor mentioned “the self-employed”
subsequently, but this too was negative as they were only named to be the
targets of a £630million raid on “disguised earnings.”

In the AS’s full report, the Treasury explains: “This will ensure that
self-employed users of these schemes pay their fair share of tax and National
Insurance.”

Steps will also be taken to make such schemes “less
attractive” for employers to use, by denying tax relief on contributions unless
tax and NI are paid within a set time period.

The Freelancer & Contractor Services
Association said it welcomed any measures that tackle disguised remuneration
schemes, which it observed have become particularly complex.

“[They]
entice contractors and self-employed by the high returns offered,” FCSA
said. “It has become increasingly difficult for legitimate businesses to
compete with these schemes.”

The
association is more critical of the chancellor’s decision to yesterday to hit
many VAT-registered freelancers, specifically those who use the VAT Flat Rate
Scheme.

Although it said it was “not surprised” by the move – to impose a new 16.5% rate for VAT Flat
Rate Scheme users who have ‘limited costs,’ the FCSA’s Julia Kermode called it
unfair.

Under the change, traders who incur costs on “goods” of less than 2% of VAT
inclusive turnover, or of less than £1,000 a year, will have to implement the new
rate from April.

“We
are disappointed by this change,” says Brookson, a tax specialist for freelancers.

“There
will be a short period of consultation before the legislation is finalised
which will commence on 5th December so the final legislation may not be
published until March 2017.”

The ATT,
a tax body, shares the concern for labour-only businesses – the targets of the rate
hike – but struggled to make sense of it, even after reading HMRC’s
technical note.

“We are
mystified as to what mischief this is intended to correct,” said Michael Steed
of the Association of Taxation Technicians.

“The
introduction of a definition of what constitutes a ‘limited cost’ trader will
inevitably complicate the FRS” which has for a long time simplified VAT rules,
he said.

But another of Mr Hammond’s announcements yesterday the association welcomed
– and freelancers will do to, as it will give them a much-needed breather.

In particular, the chancellor said to avoid the UK making “hundreds of tax
changes twice a year,” he will scrap Autumn Statements and let Budgets be the key
event for reforms.

“Mr Speaker I am abolishing the
Autumn Statement,” the chancellor told the House of Commons. “Starting in
autumn 2017, Britain will have an autumn Budget, announcing tax changes well in
advance of the start of the tax year. From 2018 there will be a Spring
Statement, responding to the forecast from the OBR, but no major fiscal event.”